The next few years will decide which business models will survive and which will undergo sweeping changes. There are companies at the crossroads and technological evolution, the modern consumer and the dynamics of the retail market will compel them all to confront whether they are prepared to undergo reinvention.
This article will introduce a philosophy that makes it possible for organisations and their owners to reinvent themselves. The objective is learning how to be relevant and successful in a tumultuous market.
In 2013 it became clear how fast things are evolving, and then last year, the world reached a tipping point – for the first time in history, consumers spent more time in front of small screens (smartphones and tablets) than large ones (desktop and television).
The next two years should see the breakthrough of wearable devices and the rise of the ‘internet of things’ in which everything from one’s car to one’s toothbrush will be connected.
The year 2013 also illustrated how quickly the fates of companies can change – Blackberry fell out of favour as the corporate phone of choice and Nokia sold for US$5 billion when it was worth significantly more just a decade earlier.
Three new types of competitors
Most companies use competitor analysis to analyse their direct competitors. While such analysis is obviously important, it is no less crucial to take a closer look at three new types of competitors.
Start-ups: small, sharp players are undermining quite a few of the traditional business models used by established companies. Smaller players are looking for new and efficient ways to enter the market. Despite their limited initial market, it is still crucial to monitor their activities because this is the type of player that revolutionises the market;
Major digital players: every company should start from the assumption that organisations like Google, Amazon and Apple may one day become their competitor.
These big players have lots of clout, money to burn, a wealth of data and top technology enabling them to enter any market they choose with a fair degree of creativity;
Consumers themselves: technology is cheaper and better, resulting in competition from consumers themselves. The introduction of cheap and high-quality digital cameras destroyed the independent photography business. Modern consumers have no use for a photographer anymore; they take their own pictures.
The taxi industry is also under attack by Uber and the travel industry is struggling with AirBnB. More and more often, companies are finding themselves competing with their consumers’ hobbies.
The answer is reinvention.
Markets are unpredictable and in a constant state of flux. Long-term strategies are indispensable but need to be evaluated every three months. In order to avoid becoming obsolete, businesses need to self-evaluate thoroughly and prepare for the future using a different approach than the one that has proven successful in the past.
Step 1: reinvent the model
Business owners afraid to disrupt or ‘eat’ their own business models might find their heads on plates someday. As players in ever-changing markets, they must have the courage to let go of what they have and opt for something new, even if that means cannibalising their own markets.
A recent example would be the Blockbuster versus Netflix case study. Blockbuster was one of the biggest video rental businesses in the world – at one point there was a Blockbuster branch within 10 minutes of every American’s home. Then Netflix came onto the scene, initially offering a subscription for ordering DVDs. The DVDs were shipped via regular mail and the customer simply sent them back afterwards.
When Netflix and VOD (video on demand) eventually killed Blockbuster’s business model, they started taking over other companies. Blockbuster wasn’t willing to adjust its existing business model whereas Netflix immediately jumped on the streaming trend.
By offering streaming services, the company lost some of its postal customers to its new service but Netflix abandoned its postal order activities just a few years later to focus completely on streaming. This is all because the company wasn’t afraid to eat its own business model.
During a recent visit to Stanford, professor Baba Shiv advised his listeners to carry out a ‘pre-mortem’. Companies and people are usually good at performing post-mortems but by then it’s too late to analyse the causes of the disaster and determine how it could have been averted.
A pre-mortem aims to identify possible future causes of business death in advance, thereby enabling a company to take proactive steps to ensure its survival. This is a golden tip for any organisation. The key is to plan the pre-mortem while a company is still in top form.
Step 2: reinvent the relationship
A traditional customer relationship typically involved a marketing or sales funnel. Nowadays that relationship is a perpetual loop. Decisions are influenced by a great many sources and channels and customers remain involved after the purchase.
Companies must realise they only have one customer relationship per consumer. The consumer who visits a store’s web page, Facebook page and physical store is one and the same. There’s little sense in implementing both an online and offline strategy; companies just need a customer strategy, period.
The Apple account is probably the textbook example of what a single customer relationship should look like. I still can’t get over the fact that a credit card purchase in London or Chicago is enough to be recognised as an Apple customer – they always find my customer data with no trouble at all.
A modern customer relationship is based on an attitude of extreme customer centricity. The elaboration of this relationship is often most apparent in the details. A study by global consulting firm McKinsey found that satisfaction in a customer relationship was mainly dictated by details.
The report showed that the difference in achieving satisfaction was not made in the classic channels or products but rather between the channels. Most businesses will usually have their basic processes and products under control and are more likely to slip-up via errors in the detail. If you analyse a business’ customer relations you will soon see whether it is customer focused. An excellent gauge is the way the business deals with complaints or when someone is prepared to recommend a ‘competitor’ if it’s better able to help the customer.
Step 3: reinvent the structure
The final step is implementing the new approach, which is pretty difficult within the existing company structure. A touchpoint-based organisation makes for a fragmented customer relationship. The trick is to infuse an organisation with speed and flexibility, which requires mental agility.
Adopting new structures does not work without a mental adjustment. Adam Pisone, co-founder of Yammer, made a strong statement on the subject. He claimed, “You don’t have to change the structure of a company to become flexible; you just have to stop using the company structure.”
Peter Hinssen’s latest book The Network Always Wins examines the use of internal networks. If the market has become a network then organisations have no choice but to also operate as networks.
“It takes a network to serve a network” is one of the most remarkable quotes in his new book.
The personal challenge
It’s not just about reinventing companies. It’s even more important to reinvent people. There’s much talk about the need for change in organisations and this boils down to changing the individuals that work for those organisations. We all know how hard it is to change others but when it comes to ourselves, we are completely in control.
This is a story about changing ourselves; about having the courage to stand in front of a mirror and ask on what level we need to up our game so we can still make a relevant contribution to the organisation in a few years’ time.
The battle between man and machine will intensify in the years to come and humans will have to prove their added value.
The hard truth is that robots will increasingly replace humans in many areas whereas, in the past, we would bring in cheap labour from low-wage countries. If and when that happens, we humans must bring something extra to the table.
Instead of only looking to others for change, those that find success will be the ones who aren’t afraid to reinvent themselves.